7. Assume that the economy is initially operating at the natural level of output. An increase in consumer confidence will cause. A) a reduction in the real wage in the medium run. B) an increase in the real wage in the medium run. C) no change in the real wage in the medium run. D) ambiguous effects on the real wage in the medium run. E) none of the above
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7. Assume that the economy is initially operating at the natural level of output. An increase in consumer confidence will cause.
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A) a reduction in the real wage in the medium run.
-
B) an increase in the real wage in the medium run.
-
C) no change in the real wage in the medium run.
-
D) ambiguous effects on the real wage in the medium run.
-
E) none of the above
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- Assume that the macro-economy is initially in short -run equilibrium. What happens to the equilibrium price level and equilibrium level of real GDP if interest rates in the economy fall? Question 4 options: a) Both the equilibrium price level and the equilibrium level of real GDP decrease. b) The equilibrium price level increases and the equilibrium level of real GDP decreases. c) Both the equilibrium price level and the equilibrium level of real GDP increase. d) The equilbrium price level falls and the equilibrium level of real GDP increases.(17) Assume that the economy begins in long run equilibrium and the central bank increases the target interest rate. In the short run, what happens to the level of GDP? Group of answer choices (A) It stays the same (B) It goes up (C) It goes downSuppose that an economy’s production function is Cobb–Douglas with parameter = 0.3 a. What fractions of income do capital and labor receive? b. Suppose that immigration increases the labor force by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage? c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage ?
- 2. Explaining short-run economic fluctuations A majority of economists believe that in the long run, real economic variables and nominal economic variables behave independently of one another. For example, an increase in the money supply, a (real/nominal) variable, will cause the price level, a (real/nominal) variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a (real/nominal) variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as (price neutrality/monetary neutrality/the quantitiy theory). However, in the short run, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS)…(21) Assume that the economy begins in long run equilibrium and the central bank increases the target interest rate. In the long run, what happens to the level of GDP? Group of answer choices (A) It goes down (B) It goes up (C) It stays the same1) The total expenditure in Macroland begins with these initial levels (in trillions of dollars): GDP = 10; autonomous consumption=1, Investment = 2; Government = 2; Net Exports = 0 and T=2. Assume MPC = 0.75. There is a sudden shock to so called business confidence leading to decrease in investment by 1. Find the change in the equilibrium level of income. 2) Inflation in Macroland is 5% this year and it is expected to remain at this rate for a foreseeable future. If true then CPI will double in around 14 years. CPI will double in around 20 years. CPI will double in around 25 years. CPI will double in around 10 years.
- 3. Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition behind the results on consumption, productivity, wages and price levels. For some of these rather than the intuition you should explain the importance of this evidence in terms of supporting/rejecting important theories in economics. This is especially true if the evidence itself is either weak or ambiguous.With COVID 19, the economy is experiencing unprecedented territory; businesses have to accommodate workers and customers for their safety with personal protective gears, and social distancing, such as limit the number of customers. In the meantime, many consumers are cutting their spending due to negative news, such as temporary pay cuts and economic uncertainty in near future. a. With the given information, what'd happen to the economy in short run? b. And what'd happen to the economy in long run, specifically, explain how long run adjustment occurs. State a new equilibrium price level and output in the economy and explain why using module 5. Aggregate Demand and Aggregate Supply. (It is assumed that the economy was initially in long run equilibrium and everything else stays constant.)7. Consider a neoclassical growth economy described by the following.•Yt = K0.3t ·L0.7t (aggregate production function)•s = 0.35 (saving rate)•δ = 0.10 (depreciation rate)•n = 0.01 (population growth rate)•L1 = 120 (initial population)•K1 = 160 (initial capital stock)•g = 0 (technological growth rate)Compute K, Y , k, y, and c for the first three periods. Please report numerical answers to two decimal points.
- Assume that the macro-economy is initially in short -run equilibrium. What happens to the equilibrium price level and equilibrium level of real GDP if households believe the economy is heading into a recession? Question 11 options: a) Both the equilibrium price level and the equilibrium level of real GDP increase. b) The equilibrium price level increases and the equilibrium level of real GDP decreases. c) Both the equilibrium price level and the equilibrium level of real GDP decrease. d) The equilibrium price level falls and the quilbrium level of real GDP increases.Q1: Define any five macroeconomic terms: 1.Aggregate demand 2. Aggregate supply 3.fiscal policy 4.Inflation 5. Economic growth Use these five terms to describe why prices of everyday use items are rising so rapidly in Pakistan.?Recommendations: 1) definitions of the terms are correct. 2) However remedies per the macro terms as defined are vague. 3) first discussed the problems and then relate the terms in remedies. 4) remedies must be according to specificity.Assume that the economy starts at the natural level of output. Now suppose there is a permanent increase in the relative price of oil. a. Using the wage-setting and price-setting diagram (and explaining the intuition of the curves), show what happens to the unemployment rate in the medium run. Why does this happen? b. Assuming a simple production function, Y=N, where Y is output and N is employment, explain what happens to mediumrun equilibrium output. C. Assume the central bank has an inflation target. In an AS-AD diagram (explaining what lies behind the curves), show what happens to output and inflation in the short run and the medium run.